Financial Stability Council discussed cooperation between the Parliament and the NBU and noted the urgency of defining the Bitcoin land other cryptocurrency legal status in Ukraine

04 September
2017

Press Release

On
31 August 2017, took place the regular meeting of the Financial Stability
Council, headed by the Minister of Finance of Ukraine Mr
Oleksandr Danyliuk with participation of Acting Governor
of the National Bank of Ukraine MrYakivSmolii, Head of the
National Securities and Stock Market Commission MrTimurKhromayev, Head of the Nthe National Commission for the State Regulation of
Financial Services Markets, MrIhorPashko, Managing Director of the Deposit Guarantee
Fund MrKostyantynVorushylin, Deputy Minister of Finance Ms
Oksana Markarova and Yuriy Butsa, Deputy Governors of the NBU Ms
Katerina Rozhkova and Mr
Dmytro Solohub, and other representatives of these
institutions.

The Council noted that systemic
risks to the financial system remain under control, and expectations remain
positive. Economic
growth is volatile and moderate due to the long negative effects of the
blockade of uncontrolled territories, but it must accelerate in 2018.

Part of the meeting of the Financial
Stability Council was dedicated to discussing cooperation between the
Government and the NBU to ensure price stability, which is an important prerequisite
for financial stability in the long run.

"We support the initiative of the Government and the
Ministry of Finance to introduce medium-term budget planning as a prerequisite
for strengthening the sustainability of public finances. Conducting prudent
fiscal policy and reducing debt load will help achieve low and stable
inflation. We hope that the 2018 budget will be adopted on the basis of the
approved budget resolution for 2018-2020, which envisages the transition to a
three-year budget planning horizon ", - said Deputy Governor of the National
Bank of Ukraine Mr Dmytro Solohub.

Also, according to the NBU, price stability
will be facilitated by medium-term forecasting of the dynamics of funds on the
accounts of the Government and management of their balances.

According to First Deputy Minister of
Finance Ms Oksana Markarova,
further increase in the efficiency of liquidity management will become possible
after the transition to medium-term budget planning not only at the central,
but also at the local level. This will ensure more even and predictable
government spending.

During the meeting of
the Financial Stability Council, the issue of tax aspects of banks dealing with
problematic debts was considered. To date, part of the problem issues
that banks face in their daily work is removed.
According to the results of the discussion, it was agreed that the Ministry of
Finance after consulting with the NBUwill come up with a tax explanation in order to ensure a uniform interpretation of
the tax legislation.

At present, work is underway to introduce a new software
complex, which will meet international standards, for the depository clearing
transaction at the National Depository of Ukraine and the Settlement Center.
"Acquisition of such complexes and systems will take place on a tender
basis, and their implementation will be scheduled for 2018," specified MrTymurKhromayev.
After the creation of the basic functional, technological and regulatory
prerequisites, the consolidation of the NBU and the National Depository of
Ukraine will be consolidated into a single depository,
which will be responsible for accounting for state, municipal and corporate
securities.

At the same time, the clearing system should
be simplified and separated from other activities, in particular those
relating to tpayments on transactions or banking
activities. The legally established monopoly of the Settlement Center in
clearing and processing cash settlements for securities transactions will be abolished, and access to the Ukrainian market will
be opened to foreign clearing institutions. However, the Settlement Center must
be transformed from a banking institution, the main shareholder of which is the
NBU, to a specialized financial institution that will 100% belong to the
National Depository of Ukraine and which will act as a "light centralized
counterparty" (light CCP). Meanwhile, the CCP will only be involved in
conducting the calculations solely on the basis of the
contracts in which the CCP acts as a party to the settlements.

"The terms are critical to the success of the
project. Therefore, it is important that in the coming years, provided the
necessary prerequisites, the transfer of state and municipal bonds to the
depositary from the NBU to the National Depositary has taken place, and the
issue of the banking license of the the Settlement Cente has been resolved. There should be a concentration of
corporate rights in the National Depository of Ukraine. If the plan is
implemented in 2020, we will have the effect of the proposed model ",
summed up the Head of the National Securities and Stock Market Commission.

The members of the Financial Stability
Council paid much attention to discussion of the legal status of Bitcoin and other cryptocurrency
in Ukraine, regulation and taxation of operations with it.

During the discussion, the participants noted the
importance of the IT industry for the development of the Ukrainian economy. The
state is interested in further development of this sector and creation of
favorable conditions for promotion of innovation,
therefore the members of the council have agreed to find the optimal solution
and common position of financial market regulators regarding cryptocurrencies.

Members of the Financial Stability Council specified a
variety of approaches to determining the status of cryptocurrencies
and regulatory approaches in different countries around the world. For
instance, in the European Union, Bitcoin does not
have the legal status of currency or money but it is accepted
by individuals and legal entities as a medium of exchange and can be
transferred, stored or sold electronically.

As a result of the discussion, the members of the
Financial Stability Council decided that a more thorough analysis of the legal
status of Bitcoin and other cryptocurrencies
in Ukraine and in the world is necessary. The results of the analysis will be
the basis for further developments in the legal and regulatory framework. A
working group will be established to do that. It is planned to engage to the discussion not only
representatives of financial market regulators but also experts.

Financial Stability Council

The Financial
Stability Council was established by the Presidential Decree in March
2015. The Board comprises the Governor of the National Bank of Ukraine, the
Minister of Finance of Ukraine (co-chairs of the Board), Head of the National
Securities and Stock Market Commission, Head of the National Financial Services
Commission, Managing Director of the Deposit Guarantee Fund, First Deputy
Governor of the National Bank of Ukraine, and Deputy Minister of Finance of
Ukraine.

The Council provides a forum for professional
discussion of risks posing a threat to the country’s financial stability. The
next meeting has been scheduled for October 2017.